Value-creation by corporate parents in multi-business firms : assessing effectiveness and congruence

Abstract

This study used an exploratory case study of a diversified multi-business firm operating in the South African food and agricultural sector to evaluate whether subsidiaries perceived that the corporate parent created value in the multi-business portfolio and to analyse the extent of congruence across the firm with respect to value-creation. The studyÕs research objectives were addressed using the triangulated perspectives of corporate-level executives and their subsidiaries. It was found that the corporate parent in the case multi-business firm created value for subsidiaries and that this value was largely delivered through the its vertical influence mechanisms. While scholars have highlighted the importance of horizontal influence mechanisms in parental value-creation, the study found that the corporate parent placed little emphasis on these influence mechanisms. With regard to the second research objective, the study evaluated the extent to which there was strategic congruence across the multi-business firm. Though significant alignment was found between the parentÕs value-creation corporate strategy and the structures that prevailed in the firm, uncertainty regarding the limits of subsidiary autonomy posed a risk to future strategic implementation. Numerous scholars have lamented the lack of theoretically-sound tools to assess the performance of corporate parents in multi-business structures. The primary contribution of this research was the construction of a value-creation composite index which allows researchers to drill further into concepts of corporate strategy when assessing value-creation by corporate parents.